Kudos to Larson/Sobotka – Must Reads on VOW Policy

I think I might have fallen in love with Larson/Sobotka. I haven’t the faintest idea who they are, but it looks like they combine some business consulting with legal work with something else involving MLSes and such. Bears looking into more.

But they have done a great service for the RE.net by compiling a guide to the new VOW policy. In fact, they call it a clearinghouse for the new NAR VOW rules, and I think it fits. There’s a lot of depth here, and a lot of breadth. Check it out in full.

For myself, I immediately zeroed in on this:

What a VOW is

For purposes of the DOJ/NAR settlement, a VOW is:

A web site, or feature of a web site, operated by a Broker or for a Broker by another Person through which the Broker is capable of providing real estate brokerage services to consumer with whom the Broker has first established a Broker-consumer relationship (as defined by state law) where the consumer has the opportunity to search MLS data, subject to the Broker’s oversight, supervision, and accountability. (See Policy Section I.1.) [Emphasis mine.]

Interesting. The law-school training kicks in and I see at least three questions to be resolved, probably through litigation:

1. What does “providing” mean?

2. What sorts of activities constitute “real estate brokerage services”? Is this governed by state regulations? Or is this to be under some common law agency theories?

3. If state law defines “Broker-consumer relationship”, then what to make of provisions like this one from Delaware?:

Entering a name and email address on an Internet or World Wide Web site is sufficient to establish a broker-consumer relationship for the use of that system, but does not in of itself create a broker-customer or client relationship for any other purpose.

Especially in light of the clause that reads, “capable of providing real estate services” in the NAR DOJ settlement, under Delaware law, there may be enough of a relationship created by entering a name and email address to use a VOW but not to take advantage of any of the real estate services provided. Does that even make any sense? Isn’t the display of property information itself a “provision of real estate services”?

Or does the NAR-DOJ settlement override Delaware law by operation of the Supremacy Clause? Even when it specifically says state law controls definition of “Broker-consumer relationship”?

Heh. I love regulations written by lawyers, don’t you?

But Larson/Sobotka has more riches in store for us:

An IDX site is not a VOW. IDX is an MLS policy under which a brokerage firm participating in MLS grants permission to other brokers participating in MLS to advertise its listings on their web sites, in return for their permission to advertise their listings on its web site. IDX sites are governed by MLS IDX rules, which are entirely unaffected by the settlement. Note that a brokerage firm can operate both an IDX site and a VOW at the same location on the web. (For example, the brokerage can show the consumer some information on its IDX site but then require her to register to see the information available only through its VOW.)

Zillow, Trulia, and other national aggregators and commercial distributors of listings are generally not VOWs. (Note that these sites are not IDX sites either, and the data feeds that some MLSs provide to them are not “IDX feeds,” as they are sometimes erroneously labeled.) These companies may receive listing data from brokers or MLSs, but display of those listings is subject to the agreements between the brokers or the MLSs and the aggregators. Neither the settlement, nor any of the policies imposed under it, applies to any of these types of sites. Note that if Zillow or one of these other sites were to become licensed as a brokerage firm, become a participant in an MLS, and actively assist consumers in buying or selling real estate (or both), it would be eligible to operate a VOW.

MLS public consumer-accessible web sites are not VOWs. (Note that these sites are not IDX sites either, as they are sometimes erroneously labeled.) A VOW is by definition the web site of a real estate broker. An MLS could operate a VOW only if it were acting as a real estate broker – we are aware of no MLS that claims the right to do so.

If for nothing else, Larson/Sobotka deserves some sort of award for spelling these things out so clearly. Now, to be sure, these should be construed as opinions of one law firm until litigation gives us definitive court rulings, but they strike me as being largely correct.

Assuming that Larson/Sobotka’s interpretations are correct, there are many implications that flow from the above three observations.

One, if IDX is entirely ungoverned by the settlement, then as Brian Larson points out, one can expect that the industry will begin to move towards VOW websites and away from IDX sites. That could, in theory, be a Very Bad Thing for brokers and agents, however, as the plain fact is that imposing a “signup requirement” to consumers (especially if defined under state law, and that state law is onerous) will drive consumers away from such websites to those that are far more user-friendly. How that will play out is wholly unknown. Perhaps MLSes start relaxing IDX rules in response; perhaps brokers start working through their Real Estate Boards to change state regulations; perhaps something else altogether. But this could be huge.

Two, if Zillow, et. al. are not VOW sites, then they do not fall under the protections (if that’s what they are) of the NAR-DOJ settlement. So brokers or MLSes can explicitly prohibit its agents or members from giving data to these national aggregators without running afoul of the Settlement. Now, before you shrug, I happen to think there’s a fairly high likelihood of this happening. Why? Because of #3 –>

Three, if public-facing MLS websites (such as www.har.com) are not covered under the Settlement in any way, then they also don’t have to follow the “Broker-consumer relationship” rule either. Which means that of all of the possible websites out there, only the MLS or Realtor Association websites can have all of the property info on every single listing without being subject to IDX rules, and without having to share any of those privileges with anyone else.

In other words, unless I’m totally misreading this, it seems to me that we now have a situation in which HAR (just to use an example; not that they would do this) could

display all of the listings info on HAR.com without limitation, and without the “signup” requirement;

prohibit all members of HAR from sending any data to Trulia, Zillow, or any national aggregator; and

force brokerages to use either shut-from-the-public VOW requirements, or ass-backwards IDX rules filled with purposely inane requirements to discourage the use of IDX.

Wow. Just wow.

If this is a correct reading, then I differ with Brian Larson only in that even if there are 10,000 VOW’s by 2010, there will only be 50 websites by 2010 that any consumer goes to.

And how does this impact Realtor.com? As Brian points out, nothing in the Settlement even mentions Realtor.com at all:

The settlement between DOJ and NAR makes no reference whatsoever to Realtor.com, either in the settlement agreement, in the attached VOW policy, or in the attached policy regarding the definition of “participant” in MLS. (In fact, the DOJ press release makes no mention of Realtor.com, either.) The DOJ lawsuit, and its settlement, deal almost exclusively with “virtual office web sites” which are by definition web sites of brokers participating in MLS offering brokerage services to their customers/clients. Realtor.com is not a VOW.

So Realtor.com is not a VOW. Does its special relationship with NAR give it the same access that all of the local associations and MLSes now have? Will it be the sole national real estate website that can offer all of the information on a listing without requiring a consumer-broker relationship?

I’m thinking the answer might be Yes.

Talk about a seismic shift in the online real estate world.

Am I missing something crucial here? Am I misinterpreting things?

-rsh

PS: I’m definitely adding the MLSTesseract to the blogroll. A great site if you’re into some of the details of this stuff.

Rob,
I don’t think I’m discounting the registration hurdle at all. I just think the hurdle is proving lower all the time. First, consumers, especially young ones, are getting more comfortable with having to log in to a web site to use it. I mentioned Facebook and MySpace as examples. Social networking of any kind generally requires some kind of login.

Second, brokers are getting more savvy about using IDX to draw the consumer in and then getting her to register in return for extra goodies. For example, here in Minneapolis, if you use EdinaRealty.com, you can sign up to be notified of changes in price, open houses, etc., on listings in which you are interested. In order to do so, you have to provide an email address. Edina is wisely responsible—if you sign up there, they do not spam you with a bunch of junk; they send you only the stuff you ask for.

I don’t think brokers will move away from IDX. I think they will just add VOW capabilities. If I were a broker, I’d be happy if only 20% of my IDX site visitors registered for my VOW. Once the visitor is logged in, think of the adaptive technology I could use to show her things she might like. (I’m thinking along the lines of Amazon’s “people who viewed this entry also view” . . .)

Thanks for the response, Brian. I guess I’ll have to go over and comment at MLSTesseract as well.

I’d love your thoughts on my speculation viz MLS/Realtor Associations being freed of the restrictions of both IDX and VOW under the new legal regime.

Because even if you’re right about customer reticence re: registration, if there is an alternative out there that gives you all of the info with none of the registration, then the customers will flock there. And the MLS/Association websites will happily distribute leads to its members, ultimately resulting in brokerages having to ask why they should invest in IDX or VOW websites when their local MLS/Association gets all the traffic anyhow due to structural advantages.